State aids workers left unemployed
by mortgage fiasco

News-Times, The (Danbury, CT)

Published
8:00 pm EDT, Friday, August 31, 2007

John Tirinzonie
, a department economist, said Thursday "collapse" probably wasn't the best word for what has happened, because so far the damage has been confined to mortgage brokers who specialized in subprime lending.

The mortgage industry has been rocked by foreclosures and bad debt, largely coming from the subprime market, which has led to layoffs and brokerage closings.

Regulators are also closing many brokerage firms because they have violated lending laws, including falsifying paperwork and lying to borrowers about the terms of loans.

The notice, posted Tuesday on the department's Web site, said, "The Department of Labor and our partner agencies are responding to workers who have been displaced by the collapse in the mortgage lending industry."

Tirinzonie said his objection to the wording doesn't mean there isn't a problem.

"We normally don't provide that service," he said of the unusual step to notify industry workers as a whole.

The problem, Tirinzonie said, is many of the mortgage brokers going out of business have only a couple of employees, so they aren't required to notify the state they are closing. A federal law requires large employers to file a notice before closing their doors, so the department can offer assistance to displaced workers.

Tirinzonie confirmed the department has been getting calls about benefits in recent weeks, enough to prompt it to issue the industrywide notice. The department wants affected workers to file for unemployment via the Web or to contact staff for further assistance in finding a job or recovering back pay.

"There's going to be a lot of aspects to this problem,"
Howard Pitkin
, commissioner of the state Department of Banking, said Thursday. More people are going to lose their homes and more people are going to lose their jobs, he said.

The Banking Department regulates mortgage lenders and brokers. It has shut down 17 lenders this year for a variety of violations; nine others are on notice their licenses will be pulled.

Pitkin said the commission can't be sure how many lenders have gone out of business, because some just closed their doors and didn't notify anyone.

"There are a lot of people unemployed and, unfortunately, there's going to be more," he said.

There are more than 3,000 first-mortgage lenders in the state and more than 2,000 second-mortgage lenders, according to the commission.

But it's not all bleak on the mortgage front.

Michael Sheahan
,
Webster Bank
senior vice president and director of mortgage banking, said the problems with the brokers have not affected the bank.

"Our mortgage business has been very strong," he said, adding Webster has been able to hire some very qualified loan professionals as a result of the broker closings.

The reason Webster and most banks are not in trouble, he said, is that they follows federal rules and more traditional practices when approving loans.

Sheahan said Webster is still making loans to people whose financial situation, such as a bad credit history, categorize them as subprime borrowers. But the bank partners with federal agencies and requires a lot of documentation.

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Mortgage industry workers who have lost jobs can visit the Labor Department's Web site at
www.ctdol.state.ct.us
or call the department's rapid response unit at (860) 263-6580.